You need the money but you don’t want to pay through the nose for the finances.

You already know that if you need a loan there are many alternatives.

Which is the best source? Where can you get your loan as quickly as possible, with the least hassle and with the least cost?

Of course there is no “one-size-fits-all” but Upgrade claims to fit this bill.

Skeptic that I am, I decided to take a deep dive to find out if they can back up their claim. That deep dive is what follows.

Upgrade is a new player in the personal lending business and one you should seriously consider checking out if you need to borrow money fast.

As you’ll see (if you read the entire post), what puts Upgrade on the map is that they have combined what they see as the best of both conventional and unconventional lending in very unique ways (and ways that nobody else offers).

As you’ll see, sometimes being the new kid on the block has some big advantages that potentially benefit people looking to borrow money. At least that’s what I discovered.

Review Summary:

Upgrade’s background and why that might save you a ton.

What credit score you need in order to qualify for a loan.

The process of getting a loan; paperwork, costs & fees, how long it takes to get funded.

Upgrade’s credit line offering – a loan product that could be far better for you (that no peer-to-peer lender offers).

What makes Upgrade different from conventional and peer-to-peer lenders and how that might save you a fortune.

How Upgrade can help you boost your credit score and drop the cost of taking a loan.

The drawbacks of Upgrade and who should stay clear.

Who should definitely get a rate quote from Upgrade.

Background

Upgrade was created in 2016 by Renaud Laplanche and 3 other top exec renegades who left rival Lending Club.

Just to remind you, Lending Club was one of the first peer-to-peer lenders and the very first to go public.

These 4 honchos were with Lending Club almost from day 1.

They were a big part of the success that made Lending Club the world’s largest peer-to-peer platform funding over $20 billion in personal loans.

So yes, the founders of Upgrade know the ins and outs of the personal loan business.

They know what worked at Lending Club – and they also saw first-hand the speed bumps that needed to be avoided and pot holes that needed to be filled.

The result is Upgrade.

Let’s look deeper and see if what they came up with really makes a difference to you.

The best way to show you what the Upgrade “secret sauce” is, is to go through a hypothetical example.

Let’s Say You Need To Borrow $10,000

You can apply by going to their site. If you go to their site, this is what their home page looks like:

Pretty straight-forward.

Simply input the amount you need and why you need it.

Most borrowers use Upgrade to refinance credit card debt, consolidate debt, for home improvement or make a large purchase.

Even if you need the bread for some other purpose, it doesn’t have to be a problem.

The cool thing is, once you click “Check Your Rate” you’ll be taken to a one-page form to fill out which only takes about a minute to complete and then you’ll have your rate. Look how simple it is:

Complete this simple form, create an account, and bingo! You’ll see what rate Upgrade can offer you.

It just takes a couple of seconds and you’ll have multiple offers with amounts, payments options and time frames to choose.

And yes, you get 100% control of which option to select.

What’s next?

After you choose the option that suits you best, you’ll be asked to provide additional information like your SSN, phone and work history.

Once you agree to the terms of the agreement, you’ll provide your bank information.

Then, if there are any additional things you need to do, Upgrade will let you know.

It might take a day or two, but once this is complete and you are approved, you’ll have the money in your account usually within a day. Sweet.

Will it impact your credit score if you only check out your rate and don’t take it any further?

No. Upgrade does look at your credit file once you check your rate but it isn’t considered a “hard pull” on your credit score so your credit score won’t be effected.

How much can you borrow?

You can borrow any amount from $1000 up to $50,000.

Do you need a minimum credit score in order to apply?

You can apply for a loan as long as your FICO score is 620 or better.

What is the length of the loan?

You can borrow the money for 36 or 60 months – and you can prepay the loan anytime without any pre-payment penalty.

What does it cost to get a loan?

The cost of obtaining a loan (origination fee) is between 1.5% to 6% depending on your credit history. The cleaner your credit file, the lower the cost.

They’ll tell you what the origination fee (and of course your interest rate) is going to be well before you make your decision to go ahead or not.

The benefit to you is that you’ll know what you’re getting into and can make an informed decision without pressure.

The origination fee is paid as soon as the loan is funded (the amount is deducted from the amount transferred to your account).

For example, if you borrow $10,000 and the origination fee is 3%, they’ll take $300 out of the proceeds and deliver $9700 to your bank account once the loan closes.

Other costs

If you pay on time there are no additional fees.

If your electronic or check payment fails however, you will be charged $10. Of course, your bank could ding you a nuisance fee on top of that.

Also, if your payment isn’t received within 15 calendar days of your due date, you’ll be charged a $10 late fee as well.

What is the Interest Rate APR for an Upgrade Loan?

Upgrade charges an APR between 7.99% – 35.89%.

Of course these rates change over time depending on prevailing market conditions. But once your rate is determined it won’t change.

It’s a fixed rate. And you can knock 0.5% off your interest rate if you make payments via auto-debit. Please note that the 6.45% rate shown above includes the 0.5% discount.

Can you get a line of credit from Upgrade?

Yes. Unlike all the peer-to-peer lenders, Upgrade offers a credit line and this is one of the several ways Upgrade stands out.

I must tell you. Nerd that I am, I love this option for borrowers.

Here’s how it works. Rather than borrowing a lump sum, and paying interest immediately on the entire sum, you can use your Upgrade credit line to only borrow money when you need it.

That keeps your costs way down.

And what’s really unique about this company’s credit line is that you get to decide how long you want to borrow the money each time you tap into the line.

You only need a 600 FICO score in order to apply for a credit line rather than the 620 for a regular Upgrade loan.

Let’s say you need $10,000 over the next 2 years. You’ll use $2000 to immediately pay off a credit card.

Next year, you plan to use $1,000 to buy a new fridge and washing machine.

And the year after that, you’ll need $7,000 to fix the roof.

When you tap the credit line to pay off the card, you take the $2,000 and tell Upgrade that you want to pay off that loan over 2 years.

Upgrade will tell you what your payments are going to be for the next two years. This may seem like a minor thing but to me it’s huge.

The payments and interest rate are fixed and your monthly payments include principal and interest.

Credit card companies don’t do this. In fact, they love it when you just make your minimum payment because that keeps you in debt to them paying high interest rates for years and years.

If you use the Upgrade line of credit, that won’t happen because they’ll tell you exactly what the payments need to be in order to pay off the debt over the period you selected.

They are doing consumers a major solid there. Respect.

Let’s get back to our example. Next year, you grab the $1,000 for your new appliances and choose to pay that amount back over 24 months.

The rate may be different from the rate you got when you took the original $2000 but that’s not a problem.

The payment and rate are fixed at that time and it’s simply added to the amount you are already paying on the first $2,000.

The year after that, you take $7,000 to fix your leaky roof and tell Upgrade you will pay them back over 5 years for that $7k.

At this point you’ve already paid back the $2,000 for credit card refinancing but you are still paying on the appliances. That’s OK.

You’ll continue paying that off over the next 12 months (you’ve already paid in 1 year on that amount) and continue for the following 4 years to pay off the money you took to fix the roof.

How An Upgrade Credit Line Can Improve Your Credit Score

OK. Let’s say you have a credit score of 605 and you want to improve it as quickly as possible.

You can do just that by using your Upgrade Credit Line. Here’s how.

Let’s say you get approved for only $1,000 on the credit line. Take that loan, and pay it back over a year (or faster). Then, ask for another loan. Rinse and repeat.

By doing this, you’ll be creating a good credit history and building up your credit score with FICO. How cool is that Pilgrim?

What does it cost to get a line of credit?

Upgrade doesn’t charge an origination fee for lines of credit. They do of course charge interest on each draw you take from the line and that can range from 7.99%-35.89%.

Remember, each time you tap into the credit line, the rate and payments are fixed for that loan. But on subsequent draws, that rate could be different.

Upgrade will notify you and you would have to accept the updated rate before making a draw.

How else can Upgrade help improve your credit score?

Unlike any other lender I’ve ever seen, Upgrade provides an entire suite of tools they created to help you get cheaper loans and have clarity managing your debt.

This helps you improve your overall finances and it helps you maintain a higher level of control. Let me explain.

Once you become an Upgrade borrower you’ll be able to take advantage of free credit score monitoring and that’s not all.

They’ll also open up their credit score simulator to you. This bad boy will tell you what’s impacting your score and the easiest, fastest ways to improve it.

All you have to do is log in to get practical easy ways to improve your score that are tailored made for you and your personal unique situation. Smooth.

Why you might get much cheaper personal loans from Upgrade compared to peer-to-peer or conventional lenders

If I needed to borrow money my first stop would be Upgrade.

I would do that because based on what I’ve seen, they should be able to deliver loans faster and cheaper than the competition.

Let me tell you why I think this way.

First, they build and use a technology platform aimed to deliver more efficiency and lower costs so they they should be able to deliver more affordable loans to their borrowers.

Another way they save money is that they don’t need the costly administrative platform that peer-to-peer lenders have.

That’s because Upgrade doesn’t have hundreds of thousands of small investors so they don’t need to deal with all those questions, emails, paperwork, payments etc.

Instead, they match borrowers with institutional investors. This saves Upgrade a fortune and it saves them a lot of time and resources.

What about these low, cheap, advertised rates I see with peer-to-peer lenders?

If you look hard enough, you can find rate tables advertised by Prosper and Lending Club. Check these out:

Prosper suggests that people with high enough credit rating might get a loan for as little as 3% although they talk about rates north of 6% on their site.

Lending Club’s rate chart is a bit more down to earth. But look at these charts carefully. In my opinion, they are useless and misleading. Here’s why.

First of all, you’ll notice that the rating system is proprietary. That means you might get an “A” rating from Lending Club and something else from Prosper. There is no way to know unless you apply to both.

Also, and this is what really bugs me, notice that within each loan grade, the rates vary widely. In the case of Prosper, you could get a AA and still pay 15%! That’s just crazy.

Oh, and by the way, from what I read from a variety of seemingly objective sources, the average rate that borrowers pay with peer-to-peer lenders is 15%.

In short, these charts are meaningless because the rate you pay will depend on your specific circumstances.

My conclusion is that the only way to know which is the best option for you is to apply and get offers at all three:

Can Upgrade fund your loan faster than the competition?

Upgrade‘s different structure also saves you time. With peer-to-peer lenders, you have to wait until small investors decide to fund part of your loan.

That could take a week or more.

Again, since Upgrade only works with institutional investors to fund the loan, they can operate more efficiently and lower costs.

This is huge money savings and I’d expect them to use that advantage to offer you cheaper loans.

They have advantages when it comes to the traditional brick and mortars lenders as well.

Upgrade doesn’t have physical branches all over the country and they don’t offer hundreds of banking products like CDs and checking accounts. That saves money too.

They are lean and focused. This is a huge savings for Upgrade as well and again, should allow them to offer lower cost loans to you.

And finally, Upgrade is a tech-heavy enterprise that opened its doors in 2016. Their technology is fresh and state of the art.

Older institutions (banks and peer-to-peer firms) are still paying for the software they built 10 years ago.

It’s much more expensive for those older lenders to increase efficiencies. That should also add to Upgrade’s ability to compete.

Based on my experience and the facts above, my guess is that they should be able to offer loans at lower rates than their competition. If I’m wrong, I’d be very surprised.

As I explained above, generic interest rate tables aren’t going to help you make a decision. Getting a quote will.

Who should NOT use Upgrade?

When I was a kid, there used to be this personal loan company that advertised on T.V. and their slogan was, ”Never Borrow Money Needlessly”.

I loved that and I’ve adopted that slogan as my personal motto ever since.

I don’t like to borrow money if I can avoid it and I don’t like you to borrow money if you don’t absolutely have to either.

If you don’t really need the money, don’t borrow it. Also, if you can’t make your payments, don’t take the loan.

This is true with respect to Upgrade loans or loans from any other source.

Who benefits most by connecting with Upgrade?

If you need a personal loan and you are checking out peer-to-peer lenders, you should also check out Upgrade. It costs you nothing and it doesn’t hurt your credit score to get a quote, so why not?

Upgrade has all the experience, tools and competitive advantages that should enable them to blow the doors off the competition and offer you cheaper, faster loans.

But there haven’t been any studies to compare Upgrade to Lending Club and Prosper (in terms of how fast they fund their loans and what the interest rates would be for the same borrowers) so I can’t make any promises. I do know that it would be silly to overlook getting a rate quote.

If you need money but you are not sure how much and/or when you’ll need it, a credit line could be a far better fit and the Upgrade credit line is certainly one you should look into. No peer-to-peer lender has that alternative for you.

In this situation, a credit line could be cheaper than a regular loan because you only pay interest on what you use when you use it and there are no origination fees.

And I love that Upgrade gives you all the tools you need to get out of debt and improve your credit score as quickly as possible.

This is something nobody else in the personal lending business offers.

Bottom Line

If you really need a loan, whether it’s to pay off credit card debt, to consolidate debt for better control on your finances or to significantly cut any other high interest debt, then Upgrade has the tools, experience and infrastructure that could provide an inexpensive and fast solution.

Not only that, they also have the resources you need to reduce your borrowing costs over time and improve your credit score. It only makes sense to give them a try.

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Who is Neal Frankle

I'm a Certified Financial Planner™ with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim. Read More »

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